The Chromalloy syndrome: enforcement of foreign arbitral awards in Ethiopia

In 1996 the case between Arab Republic of Egypt v Chromalloy Aero services brought a new debate to the international arbitration world. Chromalloy Aero services (“Chromalloy”), an American corporation, entered into a military procurement contract with the Air Force of the Arab Republic of Egypt (“Egypt”) to provide parts, maintenance, and repair for helicopters.

A dispute arose and Chromalloy commenced arbitration proceedings on the basis of the arbitration clause in the contract. An arbitral tribunal found for Chromalloy. Egypt filed an appeal with the Cairo Court of Appeals, seeking nullification of the award, and filed a motion with the United States District Court for the District of Columbia to adjourn Chromalloy’s petition to enforce the award.

The Cairo Court of Appeals suspended the award and Egypt filed a motion in the United States filed a motion in the District Court to dismiss Chromalloy’s petition to enforce the award. Subsequently, the Cairo Court of Appeals issued an order nullifying the award. On the contrary, Chromalloy had already opened a file for enforcement of the award. Paradoxically, the court said that the arbitral award is enforceable because:

1.recognizing the decision of the Egyptian court would violate United States public policy in favor of final and binding arbitration of commercial disputes;

2.according to art 5(1)(e) of the NYC, the court has a discretion to to enforce the award that “has ... been set aside ... by a competent authority of the country in which, or under the law of which, that award was made”; and,

3.citing art 7(1) of the NYC, it decided that “the provisions of the present Convention shall not ... deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law ... of the count[r]y where such award is sought to be relied upon”.

The district court of Colombia rejected Cairo Court of Appeal’s decision because “the arbitration agreement between Chromalloy and Egypt excluded their right to appeal in Egyptian courts.” The court went on to conclude that “the Cairo Court of Appeal nullifying the award does not have a res judicata effect in the United States.”

The decision, arguments and line of reasoning has raised a lot of interesting questions about recognition and enforcement of foreign arbitral awards. My main point is not to address these questions, but to ask if a foreign arbitral award that has been nullified in another State, by a competent judicial authority, can be enforced in Ethiopia.

As Ethiopia is not yet part of the New York convention to recognize and enforce arbitral awards, it uses its own standards to recognize and enforce both foreign judgments and awards. Despite the argument whether or not this system makes our arbitration regime obsolete, so many questions need to be answered- one being if it is possible to apply for enforcement in Ethiopia an award that has been nullified in another country.

There are some helpful provisions in our civil procedure code (CPC). Art 461(2) allows “analogy of the preceding articles” to recognize and enforce an arbitral awards. Referring to the preceding articles in the same chapter, we encounter art 458(d) which says that “the judgment has to be binding, final and enforceable”, which corresponds to art 461(f) that clearly stipulates an award has to be enforceable “under the conditions laid down in Ethiopia.”

To my knowledge, nothing has been written regarding enforcement of foreign awards that have been vacated in a foreign court. To give you a rudimentary structure of Ethiopian law when it comes to foreign courts: art 8(2) of CPC says that “the pendency of a suit in a foreign court shall not preclude the courts in Ethiopia from trying a suit founded on the same cause of action”- this is commonly known as lis pendens.

Note that there is a difference between res judicata and lis pendens (art 5 and art 8 of CPC). I think the position of Ethiopian courts is unclear when it comes to res judicata cases that have already been decided abroad. The Ethiopian court explaining, Cassation Case No 59953/2003, said that res judicata

Let us say an Ethiopian defendant lost a case in UK to an American claimant. Therefore, the question is can the Ethiopian party come to Ethiopia and start a fresh suit based on the same cause of action? One can logically argue that art 5(1) does not differentiate between foreign court and domestic courts; yet, the rebuttal would be jurisdiction of courts do not have extraterritorial effect.

Leaving this argument aside, I reflect on what Ethiopian courts must do if they face enforcement of a foreign arbitral award that has been nullified in another country. The major problem emanates from Ethiopia not being a signatory party to any convention in relation to arbitration. Art 456(1) of CPC says: “unless otherwise expressly provided for international conventions, foreign judgments [arbitral awards] will not be recognized and executed …” What renders this provision unnecessary is the fact that Ethiopia has not ratified the 1958 NYC; it solely relies on the grounds laid down under 461 and 458.

Under these provisions, there is nothing that implies Ethiopian courts should decline jurisdiction if they are asked to enforce a nullified award. I say the award should not be recognized. Ethiopian civil procedure law, court system should be cosmopolitan. Though jurisdiction does not have extraterritorial effect, competent courts of every nation are at par with each other. Respecting other countries’ judicial orders stems from comity. It should be taken into account that applying double standard on each nation recognizable judicial orders should be avoided.

If an award is nullified by another competent court, then why should it be recognized and enforced in Ethiopia? Why should Ethiopian courts cast a doubt in Ethiopian international arbitration regime? I do not know if you have noticed, but art 461 precludes the main ground of non-enforcement: jurisdiction of the arbitral tribunal.

The provision is silent when it comes to awards given by arbitrators about matters that “were not referred to them” (art 356 of CPC). In other words, can an Ethiopian party enforce an award that has been given out of the scope of the arbitrators? Art 461(b) simply says that a foreign arbitral award will be enforced if the award has been made following a regular arbitration agreement. This proposition is not clear. Does it include jurisdiction or the validity of the arbitration agreement as stated under 3325(1), 3326 and 3328 of the Civil Code?

Furthermore, an Ethiopian award creditor, whose award has been set aside in another country, where Ethiopia does not have any treaty, should not be given permission to come and enforce a “non-existing” award in Ethiopia.

Recognizing vacated awards makes Ethiopia a harbor for arbitration unfriendly decisions and superseded system. One thing I cannot deny is that recognition and enforcement of judgments/awards serves political purpose, not only commercial. Reading arbitral case laws, it is not rare to see awards rendered in North Korea being rejected in the US or allies of America. To conclude, by taking the second requirement under art 458(d) and 461(f) - enforceability- I say the award is not enforceable because, in the first place, it does not exist.

I am a Corporate law and arbitration expert. I am very, very much fascinated by international arbitration: commercial, maritime, and investment. The more I read about arbitration, the more I want to know. I would also like to specialize on the subject matter, which I think is helpful to Ethiopia in the future. In my personal life, I like to hang out with my friends and have fun. After all, I think life is short. Moreover, I like to read books, watch movies, travel a lot, which has become recent addiction, and learn new things. I also want to learn how to make a good documentary, which I want to develop as a hobby. I also like to blog here at Abyssina Law.